McCormick's shareholders savor a scrumptious year

Sales, profit targets are achieved despite ambitious undertakings

March 27, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Robert J. Lawless, head of McCormick & Co. Inc., told an upbeat crowd of shareholders yesterday that the company last year endured a massive restructuring project, sank more money into research and development, launched new products all over the world -- and still reached its sales and profit targets.

"For too long, good stories like ours, about companies that produce great products and shareholder return, went beneath the radar," Lawless, the company's chairman, president and chief executive officer, told an audience of about 1,000 at McCormick's annual meeting at the Hunt Valley Inn. "But I think it's changing."

Lawless described the company, the world's largest maker of spices and flavoring products, as being in a period of transformation. Last year, McCormick upgraded its computer and logistical systems, starting with its U.S. consumer division, as part of a three- to four-year modernization program expected to cost $150 million.

FOR THE RECORD - An article in yesterday's Business section about McCormick & Co. Inc.'s annual meeting reported the wrong 2002 compensation for Robert J. Lawless, McCormick's chairman, president and chief executive officer. His total 2002 compensatiion was $2.06 million. The Sun regrets the error.

McCormick last year also opened a "sensory center" in Hunt Valley where manufacturers can work with McCormick food scientists to test new flavors for their products. Products developed in the past three years now account for 10 percent of annual sales, Lawless said.

In recent years, McCormick has focused more on "value-added" products, such as complex flavorings and spice blends that can return higher profit margins, Lawless said. Such new products range from grill marinades sold in North America to seasoning packets, known as "Shotz," sold in the United Kingdom.

"The thing that fascinates me most about McCormick is its ability to generate new products," said Bill Anders, 70, who has owned shares of McCormick for 30 years. "They have all sorts of things that didn't exist 10 or 15 years ago."

Steady growth last year across two of McCormick's three main divisions -- consumer and industrial -- produced record sales and profit. McCormick's profit rose 23 percent to $179.8 million on sales that rose 4.5 percent, to $2.3 billion. Sales declined at McCormick's packaging division.

Recognition from Wall Street came last week in the form of Standard & Poor's announcement that McCormick would join the S&P 500 -- a leading stock index comprising 500 top companies.

Lawless told investors the company has been active in finding new ways to sell its products through existing channels, such as new supermarket displays in seafood and meat departments. The company is also exploring new avenues of distribution.

One target -- so-called "dollar stores" -- is a big growth area for McCormick, Lawless said. The company has secured distribution of its products through Dollar General, one of the biggest retail chains in the country, he said.

"Like the warehouse clubs 10 years ago, this newer retail format is growing fast," he said. "Also, the dollar stores intend to increase their offerings of ... food from 20 percent to 60 percent."

Long-time shareholders at the meeting yesterday vowed continued loyalty to the stock.

"Anybody who doesn't get into this company has got to be a fool," said Cliff White, 73, a retired National Security Agency worker who was at the meeting yesterday with his wife. The Whites also own shares of Xerox Corp., Intel Corp., Constellation Energy Group Inc. and Public Service Enterprise Group Inc. "This is our best one," White said.

Lawless' total compensation of $2.6 million last year represented a 41 percent increase over the previous year, according to the company's proxy statement. He was paid a base salary of $768,867, an increase of nearly 10 percent from the previous year, and a bonus of $1.28 million, up 14 percent. Lawless also received $8,000 in matching contributions to his 401(k) plan, a decline from $19,507 in 2001.

He also received a long-term incentive payout of $1.9 million in restricted stock after not receiving one in 2001. He received 286,000 stock options -- the same as in 2001.

Shares of McCormick fell 65 cents to $24.34 yesterday.

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